Mortgage lenders face repayment restrictions

BANKS and lenders chasing troubled mortgage holders for repayments face a raft of restrictions on reining in loans which will be rolled out by the end of the year.

An overhaul of the code of conduct on mortgage arrears means lenders will be banned from piling penalties onto borrowers who default on repayments. Lenders will also have to extend the current 12-month moratorium on resorting to court action to recoup loans for cooperating mortgage holders.

A restriction on the number of unsolicited calls by lenders to borrowers has also been agreed under the adapted code.

Financial Regulator Matthew Elderfield revealed yesterday that the Central Bank Commission is expected to sign off the measures next week before they come into effect by the end of the year.

He added: “The banks wanted more time but we feel this is urgent and will implement it before the end of the year. If somebody is snubbing their nose at the new code and doesn’t take action, then we will be prepared to enforce [them].”

The changes were revealed as the Government-appointed expert group on mortgage arrears and personal debt released its final report. The 17-member group, led by Hugh Cooney, found 90% of mortgage accounts were being repaid in accordance with contracts. Levels of repossessions here were substantially lower than those in Britain, it noted.

Figures also released by the Central Bank yesterday found that up to September this year, over 40,000 mortgage accounts or 5.1% were in arrears of more than 90 days. This was up on figures in June which showed that over 36,000 mortgages were in a similar position then.

It is also estimated that another 45,000 mortgages have been rescheduled, although a number of these overlap with the numbers in serious arrears. The expert group did not recommend a debt forgiveness scheme but instead advanced measures for lenders to ease repayments for borrowers.

Besides a deferred interest payment scheme, the group looked at recommendations to support social housing or accommodation for repossessed homeowners.

The Department of Environment should swiftly bring in measures to allow borrowers with unsustainable mortgages to be eligible for social housing before a repossession order is made, it said. Lenders should also agree to defer voluntary surrenders while borrowers make attempts to get on housing lists.

If the economic situation changes in Ireland, it noted, an exchequer funded mortgage-to-rent scheme could be considered which would allow a repossessed borrower stay in their home under a rental agreement funded by local authorities.

There was mixed reaction to the expert group’s report yesterday with some expressing disappointment that the measures did not go far enough to help borrowers.

Fine Gael’s Terence Flanagan said there was little beyond measures to defer interest payments. “For all other borrowers in difficulty the report contains a key recommendation that expects homeowners to apply for social housing and then hand back the keys to their home.”

Labour’s Roisin Shortall welcomed proposals by the group to ease qualifications for the Department of Social Protection’s mortgage interest supplement scheme.